Gold Has A New Buyer In Town — And The Old Price Rules No Longer Apply
“The perception of these macro policy risks appears stickier,” Struyven said.
Why Gold Market’s ‘Old Rules’ No Longer Work
"In commodities, the usual maxim that ‘high prices cure high prices' does not apply to gold," the expert wrote.
In most commodity markets, higher prices eventually slow demand or bring on more supply, pulling prices back down.
Yet, gold doesn’t work that way.
According to Goldman Sachs, annual mine output accounts for roughly 1% of the total above-ground gold stock, leaving little room for production to surge even after sharp rallies.
As a result, gold rallies tend to end only when demand falls — not when prices rise.
Struyven assumes that demand tied to global macro policy risks will remain intact through next year.
If those hedges stay in place, the portion of gold's recent gains that can't be explained by traditional flow models does not unwind.
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If those hedges remain, the part of gold's rally that can't be explained by traditional models doesn't reverse. In that case, today's prices aren't seen as stretched.
They become the new baseline.
“We see the risks to our upgraded $5,400/toz forecast as as two-sided but still significantly skewed to the upside because private sector investors may diversify further on lingering global policy uncertainty,” Struyven said.
What Could End The Rally?
For prices to fall meaningfully, the firm argues, something fundamental would have to change on the demand side.
A sharp and credible reduction in perceived fiscal or monetary risks could prompt private investors to unwind macro hedges, removing a key pillar of support.
“On the private sector demand side, Fed rate hikes could reduce gold demand both via the traditional opportunity cost channel, and by easing investor concerns about global central bank independence,” Struyven said.
On the official side, a sustained decline in central bank buying back toward pre-2022 levels would also signal a shift in the market's structure.
Absent those developments, Goldman's analysts suggest gold may continue to defy the playbook that governs most commodities, not because prices are rising, but because the reasons for owning the metal have yet to fade.
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